Differential reporting : a change in Maltese GAAP

Abstract

Since the 1980's there has been a general move towards deregulation of financial reporting by small and medium-sized entities (SMEs). The rationale for simplifying the financial reporting requirements for SMEs is to reduce the burdens that fall disproportionately on them. SMEs are considered to be 'the backbone of the European economy, acknowledged as a constant source of ideas, innovation and entrepreneurial skills, the principal providers of existing jobs and the main source of new employment' (European Commission, 2006, p. 1). SMEs in Europe have increased in economic significance which has led to them being an important focus of governmental policy (Reid and Smith, 2008). This is also the case in Malta where 98% of the total registered companies are SMEs and over 90% are micro-enterprises employing less than ten persons. Moreover, in Malta, SMEs provide around 60% of private sector employment (Gonzi, 2007).